When Twitter co-founder Jack Dorsey launched Square, there were two things that came to mind – India and other mobile platforms. Being an iPhone only app on release made it a niche market service which meant India was a long way from getting this service. It seems the government and banks in India have worked together to bring instant retail money transfer via SMS.

The service is known as Interbank Mobile Payment Service (IMPS) and so far as seven banks on-board:

State Bank of India (SBI)

Union Bank of India

Axis Bank

ICICI Bank

HDFC Bank

Yes Bank

Bank of India

In the background, National Payment Corporation of India will act as the settlement agency and provide the system support for the project. The potential for the service in a market like India is huge. According to stats released recently by the Cellular Operators Association of India (COAI), October saw a growth of 3% which translates to about 14.7 million new subscribers added, taking the total to over 500 million users.Going forward, the service is expected to enable users to make over the counter transactions like at grocery stores or paying the cab fare.

At launch the service has a cap of Rs 50,000 a day for the user with Rs. 1,000 being the maximum amount that can be remitted without end-to-end encryption. Signing up for the service is free and can be done by getting in touch with your bank who will issue a mobile money ID (MMID). Each SMS will be charged at Rs. 2 and the banks will be bearing the transaction cost of 25 paise.

Looks like India is skipping the plastic mode of payment for a virtual one.